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A ROAD WORTH TRAVELING: THE CONNECTED CAR IS AN INNOVATION CATALYST

Don’t worry about the size of your engine; the value of your car will soon lie in the power of its software. Some of the world’s most innovative companies are working on ways to make your car as intelligent as the phone in your pocket (or smarter). The movement – known as the Connected Car – has gained huge traction over the past couple of years, resulting in an entirely new ecosystem of players. Big money is flowing in, communities are popping up, and new corporate bedfellows have emerged. While it is still unclear as to where the industry will go or what hurdles it will have to overcome, the prize for innovation has made the journey worthwhile for both corporations and startups alike.

The connected car revolution is real, big, and here to stay.

The first major challenge to making the connected car feasible is overcoming regulatory hurdles. However, these walls are already beginning to crumble. On Monday, the California Department of Motor Vehicles (DMV) approved rules to allow autonomous vehicles on public roads, representing the latest in a string of regulatory moves that ease the path to realizing the full potential of the connected car.

Interpreting these regulatory movements as a positive signal, corporations have begun dumping huge amounts of money into investments and funds specifically targeted towards the connected car. One of the more recent announcements made in early May was the $100 million Connected Car fund established by Nokia. By some accounts, this was not only a venture investment but also a way to reinvent a struggling business – a big bet to say the least.

With this type of money flowing into the connected car industry, it is clear that the movement is here to stay. At this point, most of the major automobile manufacturers have invested in Silicon Valley outposts in search of the prized and elusive “secret sauce” for differentiating in the marketplace.

Of course, where there is new technology, money, and eager corporations, there are also start-ups. One example is Automatic Labs, which has created a product that allows your car and phone to trade information in order to track your car’s health, remember where you parked, and even provide support in the event of a crash. However, this is just one of the many startups hoping to strike gold in the connected car industry.

With both startups and corporations adding to the mix, the connected car industry continues to grow, and, by the looks of it, is nowhere near the finish line.

While the road is paved, the destination remains unknown.

Most of us have been trained to envision a future with automated cars through countless science fiction movies; however, most of the practical applications and use cases of the connected car have yet to be proven.

People are working on every possible angle – from hardware to software, built-in to aftermarket, safety to luxury. Yet, what we are increasingly seeing is that large companies are forced to place bets on very specific niches in hopes of eventually standing out in a crowded market. Some have turned to biometric integration so that your car can react based on changes on the physical behavior of the passenger. Some companies are thinking in more incremental terms around the next generation of automated parking. Others have taken a more wallet-centric approach, seeking to find ways to save time and money at the point of refueling.

The different ways these companies are approaching the opportunity shed some light into a larger debate often playing out behind the scenes. Executives at the large, incumbent players recognize the opportunity and are sponsoring investments with a long path to returns, but are clearly still debating the area of largest potential.

Guessing the future has always been a fool’s game, and this is especially true in such a dynamic market. Regulators have yet to lay down all their cards, concerns remain about the safety and security of the connected car, and then there are the users – the centerpiece of this entire revolution – who remain curious, and often skeptical, until they actually get behind the wheel.

The Race to the Finish Line is a Team Effort

While not all boats will rise with the tide, there is room for both small and large players to win in the connect car movement. The market as a whole will likely grow as consumers’ willingness to pay top dollar for premium experiences begins to materialize. The effect of this in the near-term is an unusual dynamic of co-opetition, where working together doesn’t necessarily make any single party worse off.

This is playing out in a few different ways, including in a very strong subculture of enthusiasts working across corporate boundaries. Pockets of technologists, entrepreneurs, auto-buffs, and enthusiasts are banding together for the sake of sharing a common passion for the connected car. One example is Connected Car Silicon Valley, which brings together influencers, startups, investors, press and large companies interested in the connected car race and network.

In a more formalized way, there are several new forums that have given both rise and weight to the connected car dialogue. The LA Auto Show – one of the world’s largest auto stages – organized a Connected Car Expo focusing on the new identity of mobility in an era of ubiquitous connectivity ). Likewise, Meeting of the Minds is a leadership summit on innovative design and development for smart cities with a keen interest in how the connected car will change the way we live in urban settings. Even our own event – API Days SF – is completely devoted to the topic of how the API developers are disrupting the car industry and driver experience.

With these new types of forums, groups, and events popping up across the country, it is clear that the connected car revolution is still a widespread discussion. Anyone not jumping into the dialogue is missing out on an opportunity to pave the future of the industry and find his/her differentiating factor.

The Finish Line Lies at the Intersection of Large & Small Companies

The console of your car is no longer owned by the auto industry. Third party devices can be readily plugged in after-market to effectively transform the driver experience. This should be viewed both as a challenge an opportunity by the auto industry. Just as technology companies have achieved growth by opening their platforms with mechanisms like APIs, the auto companies can find ways to position themselves as leaders and innovators by opening their own APIs and leveraging the startup talent.

The good news: many start-ups are already playing in this space and want to be found. Creating an environment where the world of big and small, old and new, software and hardware can intersect will drive the greatest thinking and innovation. It will allow companies to find their differentiating factor and create a sustainable advantage. And, in the end, it will allow them to unlock the value many of us believe is there – even if we can’t see it at the moment.

It is clear that the connected car movement has huge potential. However, like all innovation trends, the fanfare can quickly fade to disappointment. The usual complications around sourcing talent, effective marketing, and execution at scale are the next set of hurdles once the innovation challenge is further fleshed out. Knowing where this road will take us is still a guessing game but one worth traveling, for drivers and passengers alike.

Jason Wolenik is Managing Director and Head of FABERNOVEL US. He has helped leaders from some of the world’s largest companies design and implement innovative strategies, building growth at start-up speed. His experience spans private, non-profit, and government entities and his work has been featured at prominent venues including the World Economic Forum in Davos, Switzerland. Jason was previously an executive with Accenture and has held positions with ZS Associates and PwC Consulting over his 15+ years as a management consultant. He holds an MBA from Yale and lives in the San Francisco Bay Area.

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